Sunday, February 05, 2012

Yang vs. Court of Appeals, [G.R. No. 138074. August 15, 2003]

Facts: Conformably with her agreement with Prem Chandiramani, Cely Yang procured two cashier’s checks in the amount of Php 2.087 Million each, payable to Fernando David. Yang also secured from FEBTC a dollar draft, which Chandiramani would exchange for another dollar draft in the same amount. She gave the checks to Danilo Ranigo to be delivered to Chandiramani.

Ranigo allegedly lost the checks and the draft. The loss was reported to the police. However, the instruments were not actually “lost”. Chandiramani was able to get hold of them without delivering the Php 4.2 million check as consideration. Subsequently, Chandiramani delivered the checks to Fernando David and the latter gave USD 360,000 in return.

Yang lodged a Complaint for injunction and damages against Equitable, Chandiramani, and David, with prayer for a temporary restraining order, with the Regional Trial Court. The Complaint was subsequently amended to include a prayer for Equitable to return to Yang the amount of P2.087 million, with interest thereon until fully paid. Later on, Yang filed a separate case for injunction and damages, with prayer for a writ of preliminary injunction against FEBTC, PCIB, Chandiramani and David, with the RTC.

The cases where thereafter consolidated. After trial, a decision was rendered stating among others that David is entitled to the proceeds of the two cashier’s checks. The decision was without prejudice to any action Yang may have against Chandiramani.

Issue: Is Fernando David entitled the proceeds of the checks?

Held: YES. In the present case, it is not disputed that David was the payee of the checks in question. The weight of authority sustains the view that a payee may be a holder in due course. Hence, the presumption that he is a prima facie holder in due course applies in his favor. However, said presumption may be rebutted. Hence, what is vital to the resolution of this issue is whether David took possession of the checks under the conditions provided for in Section 52 of the Negotiable Instruments Law. All the requisites provided for in Section 52 must concur in David’s case, otherwise he cannot be deemed a holder in due course.

First, with respect to consideration, Section 24 of the Negotiable Instruments Law creates a presumption that every party to an instrument acquired the same for a consideration or for value. Thus, the law itself creates a presumption in David’s favor that he gave valuable consideration for the checks in question. In alleging otherwise, the Yang has the onus to prove that David got hold of the checks absent said consideration. In other words, the Yang must present convincing evidence to overthrow the presumption. Our scrutiny of the records, however, shows that the petitioner failed to discharge her burden of proof. The averment that David did not give valuable consideration when he took possession of the checks is unsupported, devoid of any concrete proof to sustain it. Note that both the trial court and the appellate court found that David did not receive the checks gratis, but instead gave Chandiramani US $360,000.00 as consideration for the said instruments. Factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court; they carry great weight when the factual findings of the trial court are affirmed by the appellate court.

Second, Yang fails to point any circumstance which should have put David on inquiry as to the why and wherefore of the possession of the checks by Chandiramani. David was not privy to the transaction between Yang and Chandiramani. Instead, Chandiramani and David had a separate dealing in which it was precisely Chandiramani’s duty to deliver the checks to David as payee. The evidence shows that Chandiramani performed said task to the letter. Yang admits that David took the step of asking the manager of his bank to verify from FEBTC and Equitable as to the genuineness of the checks and only accepted the same after being assured that there was nothing wrong with said checks. At that time, David was not aware of any “stop payment” order. Under these circumstances, David thus had no obligation to ascertain from Chandiramani what the nature of the latter’s title to the checks was, if any, or the nature of his possession. Thus, the court cannot hold him guilty of gross neglect amounting to legal absence of good faith, absent any showing that there was something amiss about Chandiramani’s acquisition or possession of the checks.

Yang now claims that David should have been put on alert as the instruments in question were crossed checks. Pursuant to Bataan Cigar & Cigarette Factory, Inc. v. Court of Appeals, David should at least have inquired as to whether he was acquiring said checks for the purpose for which they were issued, according to petitioner’s submission. Petitioner’s reliance on the Bataan Cigar case, however, is misplaced. The facts in the present case are not on all fours with Bataan Cigar. In the latter case, the crossed checks were negotiated and sold at a discount by the payee, while in the instant case, the payee did not negotiate further the checks in question but promptly deposited them in his bank account.

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